VIEWPOINT: US apparel retail sales shine in June

While cold weather, storms and flooding dampened demand for spring and summer merchandise in May, US apparel retailers rebounded with a better than expected performance in June after a combination of lower gas prices, sunshine and deep discounting encouraged shoppers to hit the stores.

Retail same-store sales booked yesterday jumped to 7.1% growth in June according to Kantar Retail - beating the 5.7% same-store sales gain last month and a rise of 3.2% in June last year.

Growth held up in discretionary purchases at specialty apparel and department stores, helped by promotions to clear inventories of summer lines to make way for back-to-school ranges.

"June is peak season for weddings and graduations, and this may have helped the continuing strong growth of both luxury and jewellery sectors," adds Michael McNamara, vice president, research and analysis for MasterCard Advisors SpendingPulse, which follows retail sales across all payment forms.

He also notes that strong sales of specialty apparel in June were helped by easy year-on-year comparisons, "given that in April 2010 this sector started to record some weakness that lasted a few months."

Tony Buccina, vice chairman and president of merchandising at department stores operator Bon-Ton Stores Inc, said the arrival of more seasonal weather in the second half of June "led to the best sales performance of warm weather categories we have experienced all season."

And JC Penney said its men's apparel businesses saw "solid sales increases" thanks to the Father's Day shopping period - but was forced to lower its same-store sales forecast for the second quarter.

Other department store rivals fared better, though, with same-store sales growth at Macy's Inc up 6.7% in June, and Kohl's up 7.5%

Luxury retailers like Neiman Marcus, Saks Inc and Nordstrom also had a stellar month, with the sector as a whole racking up its ninth consecutive month of year-on-year gains, according to SpendingPulse.

While June is traditionally a clearance month, retailers are no doubt hoping that this strong sales momentum will continue into the all-important back-to-school season - the second-largest selling season after the holidays - which gets underway in July.

"High fuel and food prices will still take a toll, but a sustained letup in gasoline prices will help ensure that the toll means slower growth instead of outright declines in discretionary spending in the months ahead," believes Kantar Retail's Badillo.

Average US gasoline prices have slipped to $3.58 a gallon after peaking near $4.00 a gallon through mid-May, according to data from the US Energy Information Administration.

"With growth holding up - particularly discretionary purchases at apparel and department stores - an expected letup in the coming months may prove to be more modest than feared," Badillo adds.

But after a month largely driven by discounts, the worry of course is that retailers will need to continue to offer deals to entice back-to-school bargain hunters - and that promotions will eat into their second-quarter earnings.

Hanging over the bottom line too is the impact of rising cotton, transport and labour costs, which are set to kick in in the form of higher prices on early autumn and back-to-school items.

While some retailers continued to be vulnerable to cost-cutting, swingeing redundancies and store closures in 2011, others acted swiftly to respond to the changing economic circumstances, offering rea...